Lesson 19 of 25 · 6 min

What is missing from the page: trigger and headroom

The two numbers that say how far collateral can fall are computable and are not printed.

Trigger value and headroom are the two risk figures a maintenance test implies, and neither is a line on this statement. The page prints the ingredients: closing drawn balance $1,858,563.47, market value $6,032,795.00, threshold 70% of market value. It does not print the market value at which that threshold is exactly met, and it does not print how far the present mark sits above that line.

trigger = balance ÷ threshold; headroom $ = market value − trigger; headroom % = headroom $ ÷ market value

trigger: The market value at which LTV equals 70% exactly. At the close, $1,858,563.47 ÷ 0.70 = $2,655,090.67.
headroom $: Dollars of market value that can disappear before the trigger. $6,032,795.00 − $2,655,090.67 = $3,377,704.33.
headroom %: That gap as a share of present market value. $3,377,704.33 ÷ $6,032,795.00 = 55.99%.

The same pair exists at the open, using $1,847,220.00: trigger $2,638,885.71, headroom $3,393,909.29. Capitalising $11,343.47 of interest raised the trigger by $16,204.96 and shaved $16,204.96 off dollar headroom, with the positions table unmoved. That melt is invisible on a page that never prints either figure.

What the page does print, 30.81% LTV against 70%, is the same information in ratio form. Converting it into a fall you can place against a market move requires the division above. Readers who stop at “30.81% looks fine against 70%” have the gap in points and not the gap in dollars or in percent-of-book. Trigger and headroom are those conversions. Their absence is a property of a period report, not a missing row that failed to load.

Key terms

Trigger value: The collateral value at which LTV equals the maintenance threshold exactly. At the March close, $2,655,090.67 of market value.
Headroom: Current collateral value minus the trigger, in dollars or as a percent of current value. At the close, $3,377,704.33, or 55.99%.
Unprinted derivative: A figure implied by printed ingredients and not itself a line. Trigger and headroom are the two that a maintenance test most directly implies.

Worked example

The two missing figures, at the close

Closing drawn balance $1,858,563.47, market value $6,032,795.00, threshold 70% of market value.

Printed LTV at close: 30.81%
Trigger market value: $1,858,563.47 ÷ 0.70 = $2,655,090.67
Headroom in dollars: $6,032,795.00 − $2,655,090.67 = $3,377,704.33
Headroom in percent: $3,377,704.33 ÷ $6,032,795.00 = 55.99%
Trigger at the open, for comparison: $1,847,220.00 ÷ 0.70 = $2,638,885.71
Headroom the month of interest removed: $16,204.96

Thirty-point-eight-one percent against seventy is comfortable as a ratio. 55.99 percent of the book can fall before the test is met — that sentence is not on the page.

Check yourself

Closing drawn balance $1,858,563.47, market value $6,032,795.00, threshold 70% of market value. What are the trigger value and the percentage headroom, and does the statement print either?

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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.